Good times are all gone for Jérôme-Forget

Budget de MJF - mars 2009

Nobody should have been surprised to hear Quebec Finance Minister Monique Jérôme-Forget say Wednesday that her March budget would include lots of red ink. This news was as predictable as sunrise, considering the rapid decline in corporate and personal income tax revenue and the rising chorus of demands for "stimulus" of one kind or another.
But if the dive into deficit was easily foreseen, the details of how Quebec will spend in these hard times are less predictable. Jérôme-Forget sent some modestly encouraging signals, but the pressure to spend can only continue to mount.
Parti Québécois MNA François Legault professed to be "shocked," by Jérôme-Forget's use of the d-word. True, she promised during last year's election campaign that Quebec could stay in the black. But if Legault, his party's finance critic, was truly shocked, then he'd better get out of politics and find a career he can understand.
"Before Christmas, the shops were full of people," Jérôme-Forget said to explain her broken promise. "Today, you'll see a big difference." No retailer would deny that. In fact few economic predictions made two or three months ago, anywhere on Earth, will still hold water today.
On balance, Jérôme-Forget has done a good job as Quebec's finance minister. But she's having a tough winter this year. Boom years are especially good for finance ministers, but bad years are doubly nasty for them. The Caisse de dépôt's problems and the sweetheart deal for the horse-racing industry, not to mention sparring with Ottawa and, some say, with other ministers, have all fuelled rumours that this could be Jérôme-Forget's last budget. (The minister, who's 68, says she has no plans to quit.)
Whatever her future, the immediate problem is the budget due about a month from now.
Jérôme-Forget has a modest reserve fund of $2.35 billion, but more than half of that will be needed to balance the books in the current fiscal year, which ends March 31; next year's budget will chew up the remaining $1 billion and come back looking for more, she said Wednesday. The budget could bring a deficit of up to $4 billion.
How should a province build a budget in times like these? The idea of "stimulus" means less and less as you go down the hierarchy of governments: Since economies are interconnected, smaller units of government have less impact on the big picture. The U.S. government is spending trillions, however chaotically, and Ottawa is spending $40 billion over two years. We see little benefit in Quebec adding its own trickle of gravy to the flood, except perhaps on some infrastructure schemes where federal spending can be triggered only by a provincial allocation.
Fortunately Jérôme-Forget seems unlikely to go on a spending spree. She promised to avoid cutting health and education spending - although the relatively large increases of recent years in these areas might not be matched. She also spoke of cutting "frivolous expenses," but if there are any of those left, then where has she been these last years? (We see Quebec's vast foreign-relations operation as one frivolous expense.)
Distressingly, Jérôme-Forget has said little so far about protecting municipalities from the recession. In times like these, Montreal and other cities will need more support from Quebec City, not less.
Jérôme-Forget will have a difficult few weeks. This budget will not be much fun to write.

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